Forex dealers said sustained dollar selling by exporters and banks and a higher opening in the equity market also boosted the rupee sentiment.
However, dollar's gains against the euro and yen overseas, capped the gains to some extent, they added.
The local currency had ended 23 paise higher at 54.75 against the dollar yesterday.
Meanwhile, the BSE benchmark index Sensex rose by 102.53 points, or 0.52 per cent, to 19,769.12 in early trade today.
